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Tuesday, March 05, 2002

The Simple Solution to Economic Disparities in Baseball

The Baseball Crank rises from the dugout bench and takes a swing at the economics of baseball

With spring - indeed, with any season of the year these days -
comes the debate over baseball’s finances and whether the game’s
economic structure is leading teams down the road to catastrophe or at
least to a permanent division between the rich and successful teams
and the struggling poor teams.  How do we fix baseball’s economic
problems?  Well, first we need to agree what those problems are, and
whether they are real or imagined.  I submit that most fair-minded
people can agree on a few basic principles:

1.  There are a handful of wealthy teams, and one super-wealthy
team (the Yankees), that have more money to spend on player salaries
than most other teams (assuming that all teams are trying to maximize
revenue, as opposed to teams that willingly lose money to win).

2.  There are a number of teams (we can disagree about how many)
that have difficulty spending enough money on player salaries to keep
up, salary-wise, with the average major league team if they choose to
do so;

3.  It would be preferable for baseball fans, and for the
long-term interests of baseball owners and the game as a whole, if all
teams were on an equal, or closer to equal footing as far as their
ability to pay player salaries.

By “player salaries,” of course, I mean not just major league
players but also high draft picks, foreign-born players signed on the
open market, and also the development expenses of amateur scouts,
advance scouts, etc. - all the expenses that contribute to putting
good ballplayers on the field.

The third point, of course, is open to debate as far as the
interests of the owners; it probably is in the best economic interests
of the owners to have better teams in NY than in KC, since the
marginal (extra) revenues from having a good team in NY will bring in
more money.  But nobody in Major League Baseball could afford to admit
this if the game is to inspire any loyalty outside the biggest cities,
and I credit the Lords of Baseball with enough good faith that they
would not, even amongst themselves, openly pursue such a policy.
Still, true and complete financial parity is probably an illusion; I
suspect that most fans understand and accept that their team may not
be able to maintain the permanent spending level of the Yankees and
won’t engage in free agent spending sprees on an annual basis the way
the richest teams can afford to.

But what really, really hurts fans—the problem that, in my
opinion, needs to be fixed to restore the minimal confidence in the
system that’s needed to build fan bases in smaller markets—is not
the superstar free agents like Alex Rodriguez and Mike Mussina that
they don’t get to bring to their team, but the home-grown players
(like Jason Giambi in Oakland, Larry Walker in Montreal and Johnny
Damon in KC) who leave town in their primes or just as a
youth-movement is starting to bear fruit.  As long as financial
capacity is imbalanced, fans can accept an implicit bargain: the big
fellas will buy talent and have veteran-heavy rosters, and we will
grow our own and live or die with young players who we watched grow
up.  That’s fine until you realize that the window of opportunity for
a home-grown team may be 1-2 years or less, because the stars in the
prime years of their careers will leave just as the youngsters who
came along 2-3 years later are just feeling their oats.  The Kansas
City Royals built a good young offense in 1999-2000, and now it’s
essentially gone before they had time to get their pitching in order.
The Oakland A’s had two shots at the top, and the team that beat them
twice in the playoffs just bought their best player.  Can you blame
their fans for feeling like the deck is stacked in the other guy’s
favor?


 

So, if we’re trying to think of an intelligent way to fix the core
problem—the financial obstacles to teams that just want a fighting
chance to build from within—what do we do?  There are many ideas
that get floated from time to time, but most of them seem to either
misconstrue the problem, create unintended consequences, have large
loopholes, or just be too complicated.

Revenue sharing, in the limited form tried so far, didn’t work
because owners like Carl Pohlad in Minnesota and Claude Brochu in
Montreal preferred to pocket the money they were given out of George
Steinbrenner’s pockets instead of investing in players.  The three
biggest problems with revenue sharing come from the basic problems
with any income-redistribution system: the system reduces incentives
of wealthy teams to spend money on things (like player contracts) that
attract fans and bring in more revenue; it creates incentives for
poorer teams to stay that way so they can keep getting subsidized; and
it promotes all sorts of accounting tricks to make both rich and poor
teams look poorer.  Several teams, for example, are owned by or
co-owned with the broadcast or cable TV stations that carry their
games, so it’s easy to sell their TV rights at bargain rates so that
the “profits” go to the TV company while the team looks like it’s
losing money.  Owners can also pay themselves large salaries, which
turn profits - presto!  - into expenses.  None of this is necessarily
dishonest or improper, but if moves like this affect revenue sharing
calculations, everyone will try them.

A salary cap, the solution preferred by the owners and often
floated as a panacea by sympathetic sportswriters, is bad for many
reasons: caps are either inflexible, such that they discourage trading
and ruin existing teams, or they’re laughably ineffective, or both.
Players hate caps and would start a labor war to avoid one, and if
fans don’t hate caps they should because they make the game unbearably
complicated and—standing the problem of too many players departing
on its head—they can tie teams down for years due to a single bad
contract.  Remember Danny Ferry?

MY SOLUTION: My idea for how to fix the worst of baseball’s
economic problems had its genesis in a suggestion last winter by
baseball’s most notorious player agent, Scott Boras.  Boras proposed
giving teams a financial incentive for the number of plate appearances
they give to home-grown players.  Presumably this would also apply to
innings thrown by pitchers, although as Rick Ankiel’s agent he might
want to reconsider encouraging teams to work their youngsters harder.
Boras’ other suggestion, intended to address the problem of teams
taking the revenue-sharing dollars and pocketing them, was to give
teams a financial bonus tied strictly to the number of games they win.
The problem with the first solution is that nobody wants to see teams
giving playing time to stiffs just because they came from the farm
system.  The second is even more objectionable - Major League Baseball
has worked too hard for too long to avoid having money change hands on
the basis of particular regular-season games.  The incentives for
fixing games are too serious to put in such a system.  But Boras’
ideas about incentives suggested a different path.  What we’re really
concerned about here is giving low-revenue teams an incentive to
retain their players while putting those teams on sounder financial
footing to compete in other ways, isn’t it?

So why not create a fund from which all teams - rich or poor -
would be able to draw matching funds for the purposes of re-signing
their own players? The matching-fund concept is widely used by
government programs and corporate benefit programs; it’s a
well-recognized way to subsidize something without just giving
handouts.  The more teams spend on their own players, the more they
would get back, so this wouldn’t just be welfare or a
Steinbrenner-fleecing scheme, but it would benefit teams that prefer
to lock in their own players rather than use the free agent market.
And by opening the benefits to all teams, the administrative problem
of figuring out who’s needy enough to qualify would be eliminated.

The NBA has long recognized, with the so-called “Larry Bird rule”
that it’s prudent to give teams a financial advantage in re-signing
their own guys.  (Yes, I know that rule has less meaning under
post-1999 NBA rules, but bear with me).  A matching fund would go even
further, by putting actual dollars, not just “cap room,” in teams’
pockets.  Owners would only receive help in proportion to how much
they help themselves.  The flexibility of the fund concept beats some
of the alternatives suggested for policing the owners, like requiring
them to spend a certain amount on payroll.  And in the end, it would
give fans what they want most: to keep the guys they have.  Teams
don’t have to look like rotisserie baseball squads, after all.  And
let’s not forget that fan loyalty is the sine qua non of profitability
for Major League Baseball, the source of its entire business model.

Would this benefit the players?  Some commentators, like Joe
Sheehan of the Baseball
Prospectus
, have argued that any revenue sharing will have a
downward impact on salaries, by diluting the benefit of a new player
to a team’s ability to make money.  This proposal, at least with
regard to re-signing of players, would alleviate that concern by
bringing in external revenues that could be applied only to salaries.
It would also give free agents from small-market teams more leverage
by getting their existing team back into the bidding.  Granted, by
increasing teams’ incentives to lock in their players to contracts,
the matching fund would reduce the number of teams in the market for
mid-level free agents (not the big guys - there will always be a
market for the Rodriguezes of the world), but many players would be
happy to stay where they are for the right money, particularly players
with families and/or close friends on the team. 

Would it harm the owners?  Well, the owners are naturally leery of
anything that might raise salaries, but this is probably the “least
bad” solution as far as a revenue-sharing proposal that walks the
middle ground between upward salary pressures and war with the
Players’ Union.  Ultimately, the upward pressure on salaries would be
checked by the fact that the money wouldn’t be free - even if the
match was as high as 50/50, every dollar of collective revenue spent
would still have to be met by a dollar of hard-earned team revenue.
And even George Steinbrenner, a frequent critic of the prior revenue
sharing scheme, would be harder pressed to oppose a system where the
beneficiaries would be doing something visible for the game on the
field.

How could the funds be used?  There are various ways to do this.
To make the system work you would need to have restrictions to curb
abuse of the rule by players who (1) demand a trade, and (2) use the
automatic free agency that comes after being traded under certain
conditions to demand fat contract extensions from their new team.  But
a rule banning this would be easy to devise, simply requiring that
players would be eligible to be signed with matching funds only if
they either had their rookie season with the team (under the Rookie of
the Year eligibility standard) or had been with the team for two
years, or three years, or something like that.  If the matching fund
concept was successful, it could be extended to the amateur draft or
even to signings of foreign players, although the issues would be more
complicated and the upward pressure on salaries more direct.

The bigger question is how to finance the fund, which does
inevitably lead to some of the familiar revenue-sharing issues.  Under
current circumstances, most of the available financial information
(taken with a grain of salt) indicates that the single largest source
of economic disparity between franchises is local TV revenue.  The
fund could be financed by a levy on such revenues, although that would
create the same incentive to hide the value of TV revenues in the
TV/cable companies.  Or, one could simply hire outside consultants to
devise a measure of potential market size (and revise it every few
years) and set a fixed or sliding-scale annual contribution per team.
Or, one could just leave TV revenue alone and finance the fund from
overall MLB revenue from TV contracts and merchandise.  Or, put a tax
on things like ticket sales and merchandising/licensing revenues that
are less prone to manipulation.

I don’t have numbers on how big a bite such a fund would take out
of any of those particular pies, if, for example, you had a 50/50
match for all free agents and for all contract extensions beyond the
date of eligible free agency, but all that is negotiable; the
important thing is the twin concepts of requiring a contribution of
some proportion of overall MLB revenues, on the one hand, and
providing a salary subsidy on the other.  The end result might not be
Utopia, but it would be closer to the kind of “level playing field”
that sports are supposed to symbolize, not just dream about.

Dan McLaughlin Posted: March 05, 2002 at 06:00 AM | 12 comment(s) Login to Bookmark
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   1. scruff Posted: March 05, 2002 at 01:24 AM (#604886)
Interesting idea Dan. Definitely thinking outside the box!

Anyway, I think the best way to fund it would be to simply have every team fund it equally. Whatever the total "matching funds" would be for the year gets split 1/30 between all of the owners. Then it gets redistributed to each team based on the funds they qualify for. The teams over the average make $$ and those below lose $$.

I think the potential for salary escalation would eventually prevent this from ever happening, but it's the most intriguing plan I've heard yet. I'd love to have this proposed to Bud and Fehr just to see what they'd say about it.
   2. Christopher Posted: March 05, 2002 at 01:24 AM (#604888)
Interesting plan but I could see a NBA like sign and trade strategy come into play. This still does nothing to keep a revenue sharing leech like Pohlad from resigning a player then trading him while pocketing the money. Of course you could tie that money to the player.

It would definately stunt free agent salaries, as it would be much cheaper to sign your own mediocre talent than try to land a big name guy in the open market.

   3. Paul Mazurkiewicz Posted: March 06, 2002 at 01:24 AM (#604891)
This is the best idea I've heard so far on economic disparities in baseball. Lately, I've joined the "we don't need a salary cap" camp, and I've a hard time convincing others that there's no reason for one.

Regarding the NY market, I remember reading somewhere that the NY market could probably support 5 teams in baseball. I say move the Expos to northern NJ (Hoboken would work, as would Newark), and the Devil Rays get renamed and moved to Brooklyn (they need a team again).

Maybe I'm just partial to these two places, having grown up in Brooklyn and living in northern NJ now, but still, I think the market is there. You want to cut in on George's action? That's the best way to do it. Give him more competition for the NY/NJ dollar.
   4. Walt Davis Posted: March 06, 2002 at 01:24 AM (#604896)
It's definitely an interesting idea. Something in the back of my mind tells me it won't work, but I can't quite put a finger on it. But that's not really what I'm commenting on, though my comments do relate to your proposal in that I think your proposal addresses a problem that doesn't really exist.

I hope this doesn't distract from the main topic here, but I wanted to pick a bone with a couple of your examples. The Royals could have afforded Johnny Damon and Jermaine Dye. Rany over on BP has an article looking at this question. Keeping Damon and Dye would cost about $18 million a year, and the Royals have over $17 million tied up in 5 marginal guys like Roberto Hernandez, Chuck Knoblauch, etc. The Royals chose to spend their money this way, they weren't forced to. The Royals also could have gotten much more in exchange for those players (and Appier) than they did, and not given away Jeremy Giambi for free, and they might still have a good young offense. Or maybe pitchers who throw strikes.

Similarly with Oakland and Giambi. He had agreed to a 6-year, $90 million contract before last season, but the A's refused to give him the no-trade clause that he wanted. Again, they chose to let him go. If that was a bad decision, they only have themselves to blame.

I remember the Cubs and Greg Maddux. All they had to do was match the Braves' offer and he would have stayed. Instead, they spent that same amount of money on Willie Wilson, Candy Maldonado, and Randy Myers.

And I'm unconvinced that other fire sales were "necessary". San Diego, Florida, Montreal in 94? Those were all owners deciding it was more profitable (via the current revenue sharing) to slash payroll. Montreal is perhaps a special case.

"Gee we'd love to resign him but we can't afford it because we're small market" is usually just another standard owner false cry of poverty. While your proposal might help save teams like the Cubs and Royals from their own stupidity, I wouldn't count on it. Stupid is as stupid does after all.
   5. Carl Goetz Posted: March 06, 2002 at 01:25 AM (#604902)
Meldrick wrote:

if the Yankees didn't go on the road, every AL team would be short several sell-outs a season.

James does bear this out. That's his entire point. Both teams playing a game are responsible for generating the revenue that is earned in that game. Why should the Yankees get a much larger windfall than their opponent?
   6. Cris E Posted: March 06, 2002 at 01:25 AM (#604906)
The first half of this was as succinct and well presented as anything I've read on the nature of the problem (at least from a fan's point of view).

Several points:
1. The "smart" teams are going to suffer by this plan as much as the dumb rich ones. Think about how Billy Beane, commonly accepted as a Smart GM, has built the As: some youth and some highway robbery on the trade front. If you look at the salaries paid by them last year you see that only one of the top six (Giambi) was a home grown player, and if you look deeper you see Tejada (#7), Chavez (#13) and Hudson (#14). If you look at '00 Giambi was #4 and Grieve was #12. This would make it harder to live by the Replacable Talent mantra since you'll be tempted to stand pat rather than drop Troy OLeary and sign someone else without a subsidy.

2. That said, I like it. I am not a fan of salary caps since I don't want to stand in the way of any owner who wants to do things his own way. But there has to be something done to at least acknowledge that many people feel that the revenue disparity is real, that it affects balance, and that it turns off some fans. The perception that money wins is real and discouraging to many fans in places without huge revenues. You can argue economic theory and owner culpability all you want, but if people stop watching the game because the Yankees always win it is bad for baseball. Spread a pile of cash around, let the Royals re-sign Sweeney and Neifi Perez and then fans will say "The Royals suck" instead of "The Royals are small market and hence are prevented from competing". (OK, maybe they'll say the first one anyway, but hopefully less of the second.)

3. As far as the mechanics of this go, you're going to punish teams for bad signings by saddling them with contracts that make no sense when unsubsidized. That's good. But if you're hoping that this will make KC and PIT and MIN able to keep up with TEX and NYY and LAD you're dreaming. In fact, it's likely that big spenders will benefit far more than the little guys. Think about the type of players that stick around for a long time: they're usually good. (OK I'll give you Gary DiSarcina...) If you can afford to sign good free agents and they stay good then you now get a subsidy for keeping them. Am I right in asumming that after two or three years that TEX can collect a check on ARod's salary? How about NYY contracts for Clemens and Mussina? If you're willing to bite the bullet for a few years to get some relief (or structure a FA contract to go $2m - $3m - $4m - $13m) this is going to drive owners crazy (in a bad way). (Even if it only applys to new contracts do you think ARod would object to a new contract for the same dollars when In light of this, it might be worthwhile to limit the number of players eligible in any given year to something like four or five. It will let KC keep players they think they need to and prevent NYY from collecting on ten of their top twelve '01 salaries (as they would have applying a three year rule).
   7. David Nieporent (now, with children) Posted: March 07, 2002 at 01:25 AM (#604910)
Rob writes:

Maybe I'm obtuse, but why are people so upset at Carl Pohlad for making a profit off of revenue sharing? There are two scenarios: 1) The Twins get no money from revenue sharing, and their payroll remains the same (or goes down) and lose money. 2) The Twins get money in revenue sharing and continue to spend the same on payroll and make money.

I think you're obtuse. What makes you think they lose money? Why isn't the scenario:

The Twins make money now. The Twins get money from revenue sharing, spend more, and make even more than they do now.

As Voros has pointed out repeatedly, the small market teams that have been sandbagging their payrolls haven't raised their payrolls in absolute -- not relative -- terms in years. In some cases, they've dropped their payrolls from what they were in the early 90s. And yet, their revenues are way up in that timespan.

There is no reason to believe that the Twins can't afford a $50 million payroll without revenue sharing. In 1992, the Twins had a $27 million payroll. In 2001, the Twins had a $30 million payroll. Where did all the additional ESPN/FOX money go? Let alone the revenue sharing?
   8. Walt Davis Posted: March 08, 2002 at 01:25 AM (#604921)
Erik,

You hit the nail on the head. You're a Mets fan living in NJ and currently part of their market. I'm under the impression there are also a number of Yankees fans in NJ. A team in N NJ may not bring NYers in, but it might take away the NJites who are currently fans of the Yanks or Mets. Just as importantly, they'd give them competition for cable and local TV $.

I think teams in Brooklyn and N NJ (and/or possibly Long Island) are a good idea. Also VA/DC, and probably Vegas (fastest growing metro area) though baseball understandably may be reluctant to put a team in Vegas. Philly's nearly big enough to support 2 teams now too.

So MLB _expands_ to 32 teams, with the Expos and D-Rays fighting over which gets Brooklyn and which gets DC, and the 2 new teams go into the 4th NY/NJ market and Vegas or a city to be named later. If the A's want to move to San Jose or Sacramento, let 'em.

Then we go with 4 8-team divisions, we drop the wild-card, we use the new expansion jobs to get the Union to agree to drop the DH, everybody plays on grass, and doubleheaders make a comeback. Oh yeah, $2 beers.
   9. Walt Davis Posted: March 08, 2002 at 01:25 AM (#604928)
OK, so we ignore the Yankees on the high side and the A's on the low side. Here's some data for 2001. These data come from <a > here </a>. Their payroll numbers look a bit wierd to me but so it goes.

So here's some results, omitting Yanks and A's:

Payroll: Ave. Wins

<$40 million: 74.6 wins (5 teams)
$40-59 million: 69.3 wins (7 teams)
$60-79 million: 85.8 wins (11 teams)
$80+ million: 84.5 wins (4 teams)

The numbers don't change that much with A's and Yanks in there. The low pay category goes up to 79.2 and the high pay category goes up to 87.3.

It's just one year, but you can field a mighty good team for $60-80 million. That category includes clunkers like the O's and the Rockies. But lost in the Yankees and Braves dominance have been nice runs by middle-payroll teams like Houston, St. Louis, San Francisco, Seattle.

And don't feel too sorry for that $40-60 million group. It includes a lot of dummies -- Pittsburgh, Tampa Bay, Detroit, Milwaukee. Those teams dug their own holes with rundown minor league systems and lousy free-agent signings. The other 3 teams (Philly, Anaheim, Cincy) are either competitive or seem well on their way there.

Not much wrong with that bottom group either -- Twins, A's, Padres, Marlins are all young, improving teams. Only the dummy Royals and the victimized Expos are without 'hope and faith'.

Look, it may be nearly impossible to field a competitive baseball team on a $30-40 million payroll. But I see no reason why it should be made possible. I can't open a restaurant with $5,000 in capital either. Payrolls 10 years ago were in the $20-$30 M range and revenues have exploded since then, so why should we expect teams to be competitive at nearly the same price. The Twins payroll was lower last year than it was in 91 _in raw dollars_. The Royals payroll is only about $10 million more than in 91.

Everyone here needs to read Doug Pappas' series of articles at BP, which works with MLB's own #'s and still turns up lots of fishy stuff. In <a > part 6 </a>, he looks at the rise in revenues, player salaries, and "other expenses" from 95-01. Revenues rose 156% in that time, player salaries only 113%, yet somehow "other expenses" went up 134%. Now one thing we note is that revenues are rising much faster than expenses, so it's really hard to believe these guys aren't making money. Secondly, "other expenses" covers a lot of stuff -- the cost of minor league scouts and coaches, signing bonuses, stadium expenses, front-office payroll, etc. Unless they've doubled the pay of minor-league scouts and front-office secretaries when no one was looking, where's this money going. As Pappas notes, if owners are losing money, why haven't they tried to limit growth in these other expenses?

He also looks at spending on "other expenses" and operating revenue. Although the Royals have higher operating revenue than the Twins and Marlins, they have lower "other expenses". They barely spend more on these expenses than the Expos. And their percentage spent on other expenses, although higher than average, is still lower than the Twins, Marlins, Blue Jays, Padres, and Phillies. I believe it's called investing now to reap rewards later. Or maybe it means those other teams are hiding profits as expenses.
   10. Walt Davis Posted: March 08, 2002 at 01:25 AM (#604929)
Rob makes a good point, related to my earlier one. I understand why low-payroll teams don't go after Giambi (though again, the A's had him ready to be signed, and they've ended up paying just about as much to Dye and Justice this year). But why not the other high payroll teams. The Braves spent $30 million on Smoltz, $8 million on Castilla, $6 million on Javy Lopez, and $4 million on Albie Lopez. That's a minimum of $48 million over the next 3 years and they'll still have to play somebody to play C and probably hold down a rotation spot or two. Over the next 3 years the Braves will probably spend enough for 4 years of Giambi, and all they'll really get out of it is (they hope) 3 years of a good closer and 1 year of a decent-hitting C.

Or the Cards, who signed Tino for $21 million/3 years and Isringhausen for $27/4 years. Again, 3 years of Giambi. The Mets paid $18 million for Cedeno, over $9 million for Weathers, and $5 million for Astacio, and huge pending paydays for Vaughn and Burnitz -- that's probably 3-4 years of Giambi. Texas paid $65 M/5 yrs for Chan Ho Park, $24/2 for Juan, a staggering $9 M/3 for Jay Powell and $7.5/3 for Todd Van Poppel, and $4.5 M for a year of Ismael Valdes and Dave Burba. That's $110 M. Not that they needed Giambi. Not that they needed Juan.

Not that this means the Yanks wouldn't have just outbid everybody anyway, but at least drive up the price on them.
   11. Cris E Posted: March 12, 2002 at 01:25 AM (#604960)
If there were fixed salaries for draftees, like the NBA, the value of early draft picks would go up for many teams. Way too many teams are not picking the best players available, instead opting for more affordable guys. Foregoing the compensatory draft picks isn't necessarily a big deal since they can't afford that many first rounders anyway.

But affordable first rounders would be another matter, and not just for cheap teams. A draftee salary cap would probably depress activity at the trading deadline and definitely increase the number of teams willing to try building through the draft.

I wonder why this hasn't received more play in the labor talks? The union has never been shy about giving away the rights of non-members before, and you'd think the owners would welcome the cost containment.
   12. Robert Dudek Posted: March 13, 2002 at 01:26 AM (#604968)
Dan...

Your idea is very interesting, but I think you'll admit that it would be fairly complicated to administer and make loophole proof.

I have a two-fold proposal to promote competitive balance:

1) Extend the draft to include all amateur players. There is no reason why North Americans should be subject to the draft and Dominicans, Japanese etc not be. This would limit the opportunity of some teams to buy the best non-North American prospects on the open market.

Another benefit to this proposal is that the Player's Union likely would not put up much resistence.

2) Create a Competitive Balance Fund, which would consist of all centrally negotiated media contracts as well as added contributions from each team. If this extra money were 10 million it would be 10 million from each and every team. No need to deal with accounting shenanigans or estimate the "real" worth of local TV contracts.

Next step: Hire an independent orgainisation to determine the real market size and wealth of each city with at least one major league team. This would involve per capita income, CMA population and number of TV households etc. A market like SF/Oak would be split between the two clubs of course.

You would then create a formula to determine a fixed percentage of the fund for each team based solely on the results of the above survey.

For example, the 7 largest market teams would get 0% back. The remaining 23 teams would get a percentage proportional to it's market "size". Presumably Cincinnati would be the smallest market and they would get the highest percentage of funds.

I used the formula (MARKET SIZE RANKING*0.15)^1.375, with the first 7 clubs getting 0%. The smallest market would get 7.91% of the funds. After paying in 3.33%, they receive a net transfer of 4.58%. The 16th largest market would get a net transfer of 0%.

Every 5 or 6 years, new versions of the market rankings would be created, to account for the changes in population and wealth. If an expansion club entered the league or a team relocated, a new ranking could be produced.

This would tie revenue redistribution to factors which are utterly independent of team management. It would provide no disincentive to build competeitive teams or keep payroll low, since win or lose, high payroll or low, the funds a team would receive would be the same.

If it were found that the distributed income was not sufficent to provide an acceptable level of competitive balance, a decison could be made to increase the share for the smaller market teams.

If the Union were hesistent to approve this type of proposal, the owners could offer to get rid of the free-agency compensation rule, which would make free agency a little less restricted than it is now.



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